Year’s market gains up in smoke

The jump of more than 7 per cent in the sharemarket since the summer break now looks like an illusion.

Workers spray antiseptic solution against the coronavirus at a market in Seoul, South Korea. Picture: Getty

So it might all have been a dream!

The jump of more than 7 per cent the sharemarket put on since you came back from your summer break now looks like an illusion. The 2.3 per cent lost on Wednesday means we are now within sight of where we began the year. (7197 on the ASX 200 was the January high point — we are now back at 6708).

The big difference is that we are on the verge of a global pandemic and the mood is suddenly sober.

On Wednesday, bargain hunters of earlier in the week were much thinner on the ground and no amount of flashing green on futures indicators could help reverse the sell-off which deepened over the day.

It was the type of session where if a stock fell less than 1 per cent it was doing relatively well - in this select group were conglomerate Wesfarmers, iron ore miner Fortescue and petrol station empire Caltex along with a string of property groups such as Mirvac and Scentre.

The exception that proved the rule was Medibank, the medical insurer put on 1.5 per cent to $2.94.

For those with a macabre sense of humour it’s worth pointing out that two of the best performers of the day were in the funeral sector - InvoCare up 13 per cent at $14.41 and Propell up 5 per cent at $3.69.

Special attention was meted out to a number of diversified major players which had to date escape the full wrath of traders - AMP and AGL dropped by a hefty 4.5 per cent and South 32 by 6 per cent. Woolworths dropped 2.7 per cent.

Similarly a number of stocks that had bucked the trend earlier in the week such as CSL and Aurizon were not spared this time - CSL fell nearly 4 per cent to $311.73 and Aurizon lost 3 per cent to $5.04.

The big sell-off in the session was reserved for Polynovo, the skin repair group which was one of the most successful stocks on the entire exchange in 2019 - it fell a thumping 21 per cent to $2.39 after its results.

Moreover, as Eleanor Creagh at Saxo Markets suggests, the markets are by no means oversold: “Although the move has been swift and sharp, to put the sell-off into perspective, markets are still trading at elevated multiples.”

The severity of this week’s downturn will perhaps be felt most keenly by the legions of local investors who have recently joined the sharemarket though so-called Exchange Traded Funds which generally seek to mirror the wider market’s performance.

Indeed all new investors will now understand the old market adage “up by the stairs down by the elevator”.

At the other end of the spectrum seasoned professionals, especially value investors who have been under pressure for holding large amounts of cash, will be feeling greatly relieved.

Roger Montgomery of Montgomery Investment Management said: “Notwithstanding the recent days of selling, the markets have been relatively sanguine about the coronavirus - the contrast between the market and the real world has up until this week been glaring.”

Global investment bank Credit Suisse picked the wrong week to release a report which says the Australian market has been the best bourse in the world since 1900: The survey might have stoked enthusiasm on a more normal week … but we have left “normal” times behind for now.

All eyes will be on Wall Street again overnight - US futures for all main indices were up again throughout Wednesday, but in highly volatile markets, futures are an unreliable guide.